Preparing Your Business For An Exit

At some point, virtually every CEO will transition out of their leadership role and hand the reins off to someone else. When that time comes, what can the CEO do to prepare and execute a smooth exit strategy?

Carter Heim and Bob Bishop, two of our Gravitas Impact premium coaches, have plenty of experience in this area and provided us with some comprehensive advice for both coaches and CEOs alike. Read on to see what they had to say.

Signs of the Times

CEO’s step down for any number of reasons, but there are signs and signals that indicate when the time is right.

“The first key indicator is when you don’t see the future,” Bishop said. “The greatest leaders have a clear vision of the core purpose of the business and where it is going. If you have transitioned from playing offense to playing defense, it may be time to find someone else to take the reins.”

Heim echoed a similar sentiment and laid out a handful of “company driven” signs that signal the CEO and the business are starting to diverge:

  • The business needs a CEO with different skills to take it to the next level or to lead it into a different market.
  • The company has a leader ready to take on the CEO role.
  • The leadership team is struggling, and the CEO has not, and apparently cannot, create a strong, effective leadership team.

Both coaches also emphasized the critical role of goals and priorities, all of which can change due to personal reasons (such as health, age, or a desire to spend more time with family) or professional reasons (such as interests in a new market or business idea).

“A major driver of business transition is a shift in priorities,” Bishop said. “Have you reached the point where other facets of your life (maybe family, maybe a non-profit, maybe a hobby) are increasingly becoming the focus of your time and energy? Many people feel guilty when they realize this shift but it is important to realize that these are phases of life that should be embraced rather than fought.”

Before making a move, however, Bishop suggests getting an outside perspective, saying, “It’s difficult to make a sound decision on a topic this complex when you’re in the middle of it. Getting insight from the sidelines is valuable.”

Prepping Your Exit

You wouldn’t dive into a new business without a plan, and you shouldn’t exit without one either. So how should CEO’s prepare themselves and their employees for the transition?

“Documenting a succession plan is a top priority,” Bishop said. “Most leaders have spent time thinking about this topic but until you start to write it down, you don’t have a real plan. As the plan gets written, you will likely find ideas that are in conflict,financials issues that need to be addressed, and unforeseen obstacles that must be addressed.”

“Create a specific transition plan,” Heim added. “Define expectations of the leadership team, exiting CEO, and the new CEO. Define the transition period, the specific milestones for the transition timeline, and what occurs at each milestone.”

Heim went on to detail key components for any CEO’s exit strategy, saying:

“First, clearly define the CEO’s role for the company – for today, and as it is expected to evolve over the next few years. Create a Job Scorecard for the CEO role, not based on any specific individual, but based upon the company’s needs.

Next, create a job scorecard specifically for the new CEO. This scorecard will define the exact mission, goals, and accountabilities for the new CEO during the first year in the role. It should also define where the new CEO needs to grow in order to deliver what the company needs over the next few years.

Lastly, define the exiting CEO’s role for the next few years. This is generally limited to functioning as a resource to the new CEO, and – when requested by the new CEO – a resource to others in the company.”

Don’t Be an Island

While the CEO is the central focus in the leadership transition, he/she does not have to act alone. In fact, trying to manage a transition on your own can lead to some rough patches. It’s important that the CEO utilizes both the team and the coach for a smooth process.

“The leadership team is critical to an effective transition,” Heim said. “First, the team must ensure that the transition plan is actually in place and that the job scorecard effectively defines the company’s needs and accountabilities for the role. The team also plays an integral role in the vetting and selections of the new CEO.”

Speaking on the role of the coach, Bishop says, “A quality coach will help you by asking questions and shining a light into areas that you may not have considered. This is a complicated process that few people do more than once. Having help in the navigation greatly increases your likelihood of success.”

Digging into the details, Heim breaks down the coach’s role in the following phases:

  1. Pre-Transition Phase: Identify when it might be time for a change and challenge the CEO and the team to develop a succession plan.
  2. Planning Phase: Work with the team to ensure all company needs have been considered and that the group is clear on the plan and timeline.
  3. Transition Period: Coach the team, as well as the new and exiting CEO, to facilitate a smooth transition, maintain accountability for those involved, and identify/resolve any issues that may arise.
  4. Post Transition: Begin coaching the new CEO in their role while holding the old CEO accountable to their post-transition role.

When both the team and the coach are utilized effectively, it doesn’t just make for a smooth process, It also helps CEOs avoid any potential mistakes or pitfalls, such as handing the reins to the wrong person.

“It is natural to want to transition the business to a friend or maybe a family member,” Bishop said. “This may work, but I strongly advise that you step outside the situation and ask yourself whether you would choose this person independent of your prior relationship.”


This article was originally featured as a blog on Gravitas Impact.

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